Hold That Thought. Wait to commit to paying a set commission to a buyer agent until you see the terms of the Offer.

There is no requirement that a listing broker offers compensation of any amount to list a property on the Multiple Listing Service—the National Association of Realtors response to a claim in a new class-action suit.

However, once the broker publishes the amount of compensation in the MLS, the listing broker may not alter the percentage or dollar amount without the approval of the cooperating broker.  

A listing broker who publishes a promise to pay any money to a cooperating broker must have the seller bound (through the listing contract) to pay the same amount, or the broker will be liable to pay the compensation. A random search of homes sold since January 1, 2020, in seven Madison geographic areas gave me these results: 179/202 (88.6%) listings are published with 3.0% as the Offer of compensation to cooperating brokers (buyer agents and sub-agents). Fourteen sellers paid 2.5%. In two sales, the reward was 3.5%, and in 21 deals, the listing agent published compensation was less than 2.5%. 

There is Nothing Magical About 3.0%

I contend the reason there is nothing magical driving the 3.0% number. There is a flawed assumption driving the fact that nearly 90% of all home sellers commit to paying 3.0% commission, which may be more than necessary before they ever see an offer. The fact that 88.6% of sellers in this group promised to pay 3.0% commission does not prove that they could not have sold the property on the same terms and netted more had they promised to pay less than 3.0%. 

Keep your promise, but hold on to that commitment

Clients of Essential Real Estate, LLC are fully informed of their options and the reality of how the broker compensation and cooperation works. We prefer our clients to know that they are not obligated to promise to pay any amount before seeing the terms of an Offer. An informed home seller may be wise to wait until they see the terms of an Offer before committing themselves to pay a commission more costly than the Offer is worth. 

The Buyer Agent’s Commission is Seller Home Equity

Because real estate licensees are ethical and operate their business within the rules of license law, the commission offered by the seller or the listing agent has no consideration in their decision to present your home to their client. If there are facts to counter my assertion, please share them. American home sellers could save hundreds of millions of dollars in home equity every year by reserving their right to negotiate the commission after seeing the terms of an Offer. Clients of ours have the opportunity to keep more of their equity by knowing facts and not believing fiction. 

Author: Tom Meyer, Owner-Broker, Essential Real Estate, LLC Madison, WI

The real estate transaction, disclosure, and confidentiality are the business of a Wisconsin licensee. It's in the transaction where the skill of the licensee, and their commitment to the law where the public is protected or placed at risk. What you see REALTORS do to brand themselves and their firms, promote their service, advertise, and process paper do not require a license. I believe negotiations to create and honor a real estate purchase agreement is where the agent has the greatest value in a transaction. Paying professional fee rates for the administrative services is a choice consumers deserve. Old business model driven commission rates are taxing the home equity of American home sellers. Essential Real Estate was created to put more money in the hands of the consumer by eliminating expenses for the firm and charging a fair price for the real real estate service.

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